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CA Buys Network Management Play For $350M
By Clint Boulton

April 7, 2005

UPDATED: Computer Associates (Quote, Chart) agreed to acquire Concord Communications for $350 million in cash to fortify its network service management software position.

CA will offer $17 per share for $330 million, plus an assumption of $20 million in debt from Concord for the total purchase price.

CA COO Jeff Clarke said on a conference call that CA plans to integrate Concord’s eHealth software, which measures available bandwidth and performance on a network, into its Unicenter line.

Clarke also said CA will benefit from Concord’s purchase of Aprisma Management Technologies. Aprisma’s Spectrum software provides root cause analysis, relationship mapping, topology discovery and event correlation for network services like VoIP , DSL and MPLS .

The ability to manage such network services is important for telecommunications companies, service providers and other businesses around the world, Clarke said. Concord’s products and 3,500 customers should help boost annual Unicenter sales over the normal $1 billion mark, he added.

Concord’s operations will be integrated into CA’s newly created enterprise systems management unit, led by Alan Nugent, senior vice president and general manager. Most of Concord’s 640 employees will remain with CA after the completion of the deal in three months.

Participants on the conference call questioned whether $350 million was too steep a price for Concord, which recently sported revenues of $155 million.

Clarke disagreed and pointed out that CA has traditionally had a shortfall in the network management area, which IDC rates as a $3 billion market.

“Customers are not just buying systems management independently,” Clarke said. “They’re buying it because they want the system and the network managed. When we lose to a competitor, or when a bid is going up for this $1 billion business for us, we need to have the strongest product, and this helps us come up.”

Concord’s products, engineers and sales team will help CA better compete with HP and Micromuse, two giants in the network management software sector, said IDC analyst Stephen Elliot.

“When you look at the assets in this deal, and you look at the price they paid, it’s actually pretty fair,” Elliot said. “The other thing that this is about is account control. If you don’t have a large product portfolio, you’re not going to make the short list.”

CA is already one of the most formidable management software providers in the business for helping corporations take care of their data assets. Buying Concord would make CA a tougher competitor for vendors like Mercury Interactive and BMC Software, who don’t have network competency, Elliot said.

The purchase, along with other company moves, shows that CA is gearing up for a serious competitive push to boost its sales and strategic positioning. Earlier this week, the company announced a complete business unit overhaul.

Last year, CA shored up its identity and access management portfolio by acquiring Netegrity for $430 million in cash.

CA’s move follows a small rash of management software buys from Novell, BMC and Altiris last month.

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